What Is a Power of Attorney for a Trust?

By Ronna L. DeLoe, Esq.

What Is a Power of Attorney for a Trust?

By Ronna L. DeLoe, Esq.

Generally, a power of attorney is not designated for a trust. However, there could be instances when you might want to have the same person act under both authorities. A POA is a legal document that gives someone else the power to act on your behalf. A trust, on the other hand, is managed by a trustee. While most people don't hold both responsibilities, it could happen. Especially if you know someone that you truly feel comfortable with handling your financial and health care matters while you are alive and after your death.

Suited man signing paperwork

If you're concerned about protecting your assets and yourself during your lifetime should you become incompetent, it's important to have both types of documents.

Living Trust

A living trust is created during someone's lifetime. It allows the beneficiaries you designate to get your assets quickly without an executor having to go to court to probate it, unlike a will. When you create it, you'll have to choose someone who will manage the assets on your behalf. Keep in mind that you yourself can also act as the trustee if you so choose. You'll then have to fund it by transferring assets out of your name and into the account. After you've completed the transfer in title, the trust is now the owner of those assets.

One of the most common is a revocable living document, as you can modify it at any point during your lifetime. Additionally, you can add, remove, or even cancel it entirely. Irrevocable trusts, however, cannot be changed or revoked at any time.

Power of Attorney

A power of attorney is a different type of legal protection you can make at any time. Some are just for specific situations. With this, you can authorize someone to act on your behalf immediately or at a later date. The person creating the document is the principal, and the third party being given the authority is referred to as the agent or attorney-in-fact.

Giving someone general power allows an agent to perform a variety of functions, such as selling your property, filing your taxes, and conducting bank transactions. Limited authority, however, allows the agent to act only in specific situations listed in the document. For example, if you want your agent to handle your finances for two weeks while you're out of the country, you'll give them limited authority by allowing them to access your bank accounts only during those few weeks.

With a durable power of attorney, or DPOA, the agent continues to have the power to act even if you become incapacitated. No matter what type of authority you choose to give, it will end once you die.

Having a POA for a Trust

There are times when you'll want to have both. You should give someone authority under both if you want them to:

  • Act for you in a capacity other than just managing the trust, such as handling your finances. They then has additional powers given to them in the POA document.
  • Manage your property that isn't in the trust. This allows them to put additional assets into it if you haven't put them in or if you received the assets after it was created.
  • File your taxes for you. They cannot do this without a POA allowing them to do so.
  • Change the trust in the future if you become mentally or physically incompetent. This could include closing it if you need money from the assets in an emergency situation.

While sometimes these estate planning tools overlap, the trust provides for your beneficiaries after your death, while the POA covers additional needs during your lifetime. Sometimes this is the same person. Be sure to protect yourself during and after your lifetime by ensuring that you have someone you can trust to manage your health care and financial matters.
